Luxembourg Court of Cassation invalidates excessive reimbursement clause hindering resignation rights
Luxembourg’s Court of Cassation reaffirmed the principle that an employee’s right to unilaterally terminate an open-ended employment contract (CDI) cannot be indirectly hindered by disproportionate financial penalties in a Decision No. 45/2025 of 20 March 2025 (Case No. CAS-2024-00113)
An employee, recruited in 2019 from Mauritius as a senior consultant, had agreed to reimburse certain relocation expenses if he resigned within 36 months.
The employer covered administrative and relocation costs, including temporary housing, work permit processing, and moving expenses, totaling approximately €3,149. In addition, the contract annex imposed a penalty clause of €25,000, intended to cover internal costs related to work permit procedures.
The employee resigned after only eight months. The employer demanded reimbursement of €28,149, including the €25,000 penalty.
The Labour Tribunal partially upheld the claim, reducing the penalty to €5,000.
The Court of Appeal later invalidated the penalty clause entirely, citing it as an unjustified restriction on resignation rights. The employer appealed to the Court of Cassation.
The Court of Cassation confirmed the Appeal Court’s reasoning, emphasizing two key legal principles:
- Penalty clauses must not obstruct resignation rights
The Court ruled that contractual clauses which indirectly prevent resignation by imposing excessive penalties are null and void. The €25,000 lump-sum was deemed disproportionate given the employee’s annual salary (€52,000) and vague justification. As such, it violated the employee’s right to resign at will, a fundamental public policy right under Article L.124-1.
- Contractual freedom is limited by public policy
The Court also dismissed the employer’s argument based on contractual freedom (Article 1134 of the Civil Code), stating that freedom of contract cannot override mandatory employment protections.
The appeal to the Court of Cassation was fully rejected.
Representation before the Court of Cassation requires comprehensive knowledge of procedural rules and legal principles, a high level of drafting skill, and the mandatory assistance of an Avocat à la Cour.
LLF can assist you if you are involved in a cassation appeal, whether as a claimant or as a defendant. Do not hesitate to contact us for more information on this matter.
